S Korean orders benefit Kwong Lung

IN THE BLACK:Unlike a year ago, the down supplier should post a profit this quarter, after a South Korean customer tripled its orders to US$18 million this year

By Camaron Kao / Staff reporter

Kwong Lung Enterprise Co (光隆實業), a contract manufacturer and supplier of down material and related products, could post a profit this quarter due to rising orders, SinoPac Securities Investment Service Co (永豐投顧) said in a report yesterday.

Bolstered by increasing orders from a South Korean client, Kwong Lung is forecast to post a profit of NT$7.06 million (US$232,964) this quarter, compared with a loss of NT$44.39 million a year ago, SinoPac Securities said.

“The company has been supplying down to a South Korean company since October last year,” SinoPac analyst Fion Chen (陳奕均) said in the report. “Most of the orders are concentrated in the first half of the year, which could mitigate the effect of the slow season.”

Kwong Lung is expected to supply up to US$18 million worth of products to the South Korean company this year, compared with US$6 million last year.

However, Chen forecast that full-year profits would decline slightly to NT$365 million, or NT$4.07 per share, from NT$366 million, or NT$4.08 per share, last year as its expenditure rises.

“To enhance its clothing business’ efficiency, the company is spending 3 million yuan [US$488,200] to move its production equipment [from China] to Vietnam,” Chen said.

“Furthermore, the company will distribute shares to its employees in the second or third quarter, dragging down its earnings per share this year by about NT$0.5,” she said.

Chen expects the company’s revenue to rise 9.8 percent to NT$9.98 billion this year from NT$9.09 billion last year.

Kwong Lung chairman Chan Cheng-hwa (詹正華) said on Nov. 27 last year that the company’s business would grow by 10 to 15 percent this year from the previous year because of rising orders from the South Korean company and the expansion of Uniqlo in China.

The company’s down business accounted for 46 percent of its revenue last year, it said.

Home textiles, which accounted for 26 percent of its revenue last year, would grow by 10 to 20 percent this year from last year, Chan said.

As for garments, which accounted for 26.2 percent of revenue last year, the company will focus on improving gross margins rather than on revenue growth, he said.

Gross margin for garments last year was about 10 to 20 percent, he said.